Westminster’s proposals on the UK internal market could lead to a constitutional collision

A new phrase is entering the UK’s political lexicon. As Brexit takes the UK out of the EU single (or internal) market, we will start to hear more about the UK internal market – between England, Scotland, Wales and Northern Ireland. The UK government is set to publish plans to prevent new barriers to trade within the domestic market, helping it to conclude the many international trade deals it is negotiating. This may sound innocuous, but the plans of the UK government are colliding with the powers of the devolved administrations.

With relationships between Westminster and the devolved administrations already strained after three years of disagreement over Brexit, the UK internal market is shaping up to be a major battleground between the UK government and, in particular, the Scottish government. A messy dispute in the run up to the 2021 Scottish parliamentary elections – where a second independence referendum is likely to be a defining issue – looks almost inevitable.  

The four governments already accept the need to avoid new internal trade barriers

At the end of the transition period, the UK government and the devolved administrations will no longer be collectively bound by EU law. Powers over agriculture, fisheries, food standards and environmental policy will return to the UK, Scottish and Welsh governments, creating the possibility of divergence in these areas which could, if badly managed, create barriers to trade.

The Northern Ireland protocol will continue to bind one part of the UK into the EU’s regulatory frameworks and introduce substantial trade barriers on goods travelling between Great Britain and Northern Ireland, but all four governments of the UK accept the need to avoid the risk of further friction once the EU framework falls away. In October 2017 they agreed to develop a series of common frameworks to “enable the functioning of the UK internal market”. The frameworks will set out minimum or maximum standards or shared goals, while allowing a degree of divergence. However, while there has been some progress at an official level, no frameworks have yet been agreed.

Westminster thinks more is needed to protect its ability to strike new trade deals

International trade is a reserved power. This means the UK government has exclusive responsibility for signing new trade deals by which the whole of the UK will be bound. The Scottish and Welsh governments have repeatedly complained about their lack of involvement in negotiations, but the UK government has yet to set out what role, if any, the devolved administrations will have in the process of agreeing new deals.

But the devolved administrations have responsibility for many of the areas – including controversial aspects such as food standards – that will be covered by any future deal. So, once the deals are concluded, there is a risk that the devolved administrations could refuse to implement parts of them.

So, on top of commons frameworks, the UK government wants to create enforceable legal protections for the internal market, with a white paper expected in the coming weeks and legislation in the autumn. This could see the creation of a separate body with the power to strike down any laws that it determined to be a threat to the internal market. It also proposes to borrow a concept from the EU – “mutual recognition of rules”. This would mean goods that meet English standards would have to be accepted in Scotland and Wales and vice versa, should the devolved administrations wish to change their standards.

From the UK government’s perspective, such a guarantee may be necessary when it is negotiating new trade deals with international partners. They will want to be assured that their products will benefits from market access across the whole of Great Britain (if not Northern Ireland).

Pushing ahead without buy-in from the devolved administrations is not a sustainable long-term strategy

The UK government’s proposals will also have significant implications for devolution. The Scottish government is concerned that a statutory ‘test’, set out in UK law, would unduly constrain the powers of the Scottish parliament, as bills passed by the Scottish parliament could be blocked if they did not meet this test. It argues that, on devolved matters, MSPs should have the power to determine policy for Scotland free from interference from Westminster.

They now reject the whole concept of the UK internal market, and argue that common frameworks, which are intended to operate on the basis of agreement between the four governments, will be sufficient to prevent trade barriers and that any additional controls amount to a ‘power grab’ by London.

In a letter to Michael Gove, Scotland’s constitution minister Mike Russell did not mince his words, saying that the “Scottish government could not, and would not, accept any such plans. Nor would we co-operate with them”. But the UK government has already demonstrated its willingness to use parliamentary sovereignty to override the devolved administrations in the face of dissent. In January, Westminster passed the European Union (Withdrawal Agreement) Act 2020 despite the unprecedented situation of all three devolved legislatures refusing to give consent under the Sewel convention; if faced with the same situation over a new internal market bill, the UK parliament could once again force it through.

The latest proposals will form the basis on which the UK economy will operate outside the EU. Without agreement, the Westminster is setting itself on a collision course with the devolved administrations – not just over the UK internal market legislation itself, but every time its powers are used. Given the fragility of the Union, the UK government must ask itself whether it can tolerate this level of volatility. But by refusing to engage with London, Edinburgh also risks losing any opportunity to shape rules that will govern intra-UK trade.

The promised white paper means both sides can work through these issues and find a solution that is acceptable. Both sides must take that opportunity.